What is demand planning?

Demand planning is the process of forecasting the demand for a product or service using historic data, current trends and economic insights so they can be produced and delivered more efficiently and on time to the satisfaction of customers.

Demand planning is considered an essential step in both business financial and budget planning and for supply chain planning and procurement.

Forecasting

Although a forecast is never perfect, predictive models and demand plans can still help us make more informed decisions. As guiding tools they can provide huge benefits to every step of the supply chain, from manufacture to warehouse operations, transport and logistics.

Keeping up with the demand for a product is critical, because failing to do so can result in lost revenue for the product or, even worse, lost customers. One the main goals of demand planning is to have just the right amount of inventory to meet customer demand without incurring shortages or wasting money on making and storing surplus inventory.

Demand Planning is highly beneficial in enabling and improving inter-departmental collaboration, but also in communication with external stakeholders. When information is organised and reported in the right way, trends, both positive and negative, are much easier to see.

Business Intelligence

Business intelligence is the process that enables organizations to make better decisions, take informed actions, and implement more-efficient business processes through turning business data into usable business insight.

Business Intelligence can be used to help identify new opportunities, find some insights in already existing business and help improve or make informed decision-making. It is also a critical arsenal in developing your competitive strategy a range of business decisions from operational and tactical activities, through to strategic high-level board meetings.

Business intelligence makes the interpretation of large datasets easy – whether historical, current, or forecast – and present this as actionable information that anyone in your business can understand.

Warehouse Optimization

Warehouse optimization is the process of receiving, storing, and shipping products efficiently in order to save money and improve a customer’s experience with your brand.

This entails effective and efficient use of time, space, and resources in a warehouse which may include automation and careful planning thus improving customer satisfaction and experience.

An increasing number of SKUs, manual processes, and outdated warehouse systems all contribute to creating bottlenecks. Warehouse optimization requires regularly reviews and audits of your warehouse for effectiveness. This positions the warehouse for fast shipping and quick turnarounds, lean operations and organized inventory efficiency practices.

Cost to Serve

Cost to Serve is an analytical and accountancy tool used to calculate the cost of serving the needs of a specific customer account with the aim of assessing what their profitability is, based on the actual business activities and overhead costs incurred in servicing that customer.

Cost-to-serve models provide insights into which products/services or customers are profitable, which ones are not, and how current priorities influence performance across the supply chain. This highlights areas where there are cost build-ups or opportunities for improvement and where to maintain.


Cost-to-serve can be a vital step in supply chain visibility & optimisation. It is a cross function activity that has the power to improve communication between business units.

Benefits of Cost-to-serve:

• Better customer satisfaction: Improved visibility of where your cost/profit drivers are, leads to appropriate focus and efforts behind the best possible customer/product and service mix that will improve your profitability. Resources can be dedicated to those functions or areas that make business sense and product mixes can be improved to meet your targeted sales. This improves turn-around times and create certainty for your customers that their needs will be met in time.
• Support tactical and strategic decisions: Cost-to-serve can be used to support tactical and strategic decision making. On the tactical level, it can aid companies in making short-term decisions about pricing, promotions, and inventory management. For strategic level, it can aid companies in developing long-term plans for optimizing their supply chain design/network and improving their profitability.
• Improved visibility of your supply chain: Cost-to-serve can be broken down into segments, functions, departments, products or geographies. Highlighting those locations or segments that are under or over performing. With this companies can identify inefficiencies and bottlenecks in their supply chain design and develop strategies to address them. This might involve optimizing transportation routes, reducing inventory levels, or improving customer service processes. This can promote internal and external conversations about supply chain strategy and operations
• Better understanding of financial impact: Analysing the total cost of serving a customer or product/service portfolio, aids companies with better understanding of the profitability of their business. This way the can take more informed decisions about pricing, product mix, and customer segmentation. This can help them optimise their operations and maximize their profitability. A scenario analysis can be done using insights from the cost-to-serve, which can help companies to evaluate the impact of different business decisions on their supply chain costs and performance.

• Reduce operational costs: Logistics costs, costs associated with storage, warehousing, and general inventory management are all expenses that are linked to how well inventory is optimised.
  
• If your business has poor inventory flow and high carrying costs this might be due to poor inventory rationalisation or flow. Inventory optimisation can aid with identifying which items are slow-moving or fast-selling, as well as location planning in order to optimise sales and order fulfilment.
• Boost customer satisfaction: With reduced lead times due to improved reorder levels which in turn improve your on-shelf availability, customers are sure to be happy. Having the right amount of buffer stock will take care of the fluctuations without over stocking. This way, you can consistently meet demand, avoid inventory issues, and minimise storage costs.
  
• Gain faster delivery options: Optimising inventory can help you track SKU performance across your location network. This allows for better location planning and inventory allocation ensuring that your orders can be shipped quickly and at a lower cost.
  
• Balanced inventory levels: Knowing exactly which SKUs are available at any of your locations at any point in time helps with inventory accounting, profitability, and the ability to meet customer demand. By optimising inventory, the goal is to balance inventory levels, so you don’t stock up on too much or not enough. Balancing inventory levels can help improve cash flow, optimise warehousing capacity, and enable you to consistently meet customer demand.

• Prevent over/under stocking: Overstocking can lead to not only higher carrying costs but also deadstock, which is caused by items that go unsellable due to seasonality or changes in demand. This eventually leads to product being past its expiration date, or damaged due to space constraints or exposure. Understocking can lead to permanent loss of sales from customers finding a comparable quality/price with your